Risky business

Implementing risk management and safety programs and procedures, while generally a process that starts as an internal company program, is increasingly spreading beyond company walls to become a partnership among vendors, suppliers, customers and contractors all working toward the same goal. These partnerships have led to increased communication on risk and safety issues as they arise from either party.

This spread of willingness and responsibility to minimize risk and ensure safety is positively impacting the industry and giving companies that adopt this methodology a step up on their competition.

According to the U.S. Department of Labor’s Bureau of Labor Statistics:

• Crushing injuries and traumatic amputations are most often caused by inadequate machinery guards, improper repairs and equipment training, or unsafe work conditions.

According to the "2008 Litigations Trend Survey" conducted by the law firm of Fulbright & Jawarski, Houston, Texas, the manufacturing sector has felt the brunt of legal action. More than 90 percent of manufacturers were hit with at least one new lawsuit in the previous year, with greater than half facing more than 20 new suits.

Partnering for safety

The need for strong risk-management and safety programs throughout the industry is evident. Meat and poultry processors must form partnerships with their employees, vendors, suppliers, contractors and others to reach shared safety goals. The following guidelines can help processors reach these goals:

Communicate – It is critically important that once a piece of machinery is installed and in use, employees are instructed on its proper use. This instruction includes written standard operating procedures (SOPs), sanitation standard operating procedures (SSOPs) and maintenance procedures. All of these should emphasize potentially hazardous areas of the machine and safeguards that are in place to prevent injury.

While these initial steps of an internal safety program already occur for the most part, an often forgotten key step is to continue consistent communication with employees on safety issues surrounding the existing equipment in the facility – long after the equipment has been installed. An understanding of the machinery, reminders on hazards and the safeguards in place and knowing the procedures to follow if safeguards are ever damaged, missing or modified will strengthen the success of the plant’s safety program. Consistent communication will promote the exchange of information from employees as well as when they encounter safety issues.

In addition to internal cooperation, partnerships between processors and their machinery manufacturers are essential. These partnerships should begin prior to machine installation. In fact, a processor should make its riskmanagement goals and safety processes known to the equipment supplier even before the purchase. Ask the manufacturer to participate in an open line of communication established internally and with the processor’s other suppliers. Finally, partnering with suppliers can provide evidence of their internal risk-management and safety programs. Each manufacturer should be able to explain its internal procedures to identify, eliminate and reduce hazards on its machinery. A manufacturer that has adopted this methodology will stand out from its competition.

Consequences – Many unfortunate incidents occur after operators defeat safety features on machines. In one instance, an accident occurred when the operator decided to clean an area of a machine without turning the machine off and performing the lock-out, tag-out procedure. He defeated an interlocked guard and put the machine in a slow-run mode and then proceeded to wash and wipe down moving rolls and belts.

He was injured when a rag he had wrapped around his hand became caught in a belt pulley. The operator fractured three fingers, suffered minor lacerations and dislocated his wrist.

In this instance, continual communication with employees regarding safety procedures may have prompted this operator to think twice before defeating the guard and prompted him to talk to a supervisor and about a better way to clean the machine.

All too often companies see the consequences of not having a riskmanagement and safety program in place. For example, a global food manufacturer of baking and packaging equipment had two significant losses in 1999 and 2000 at its customers’ facilities totaling more than $1.4 million. One incident resulted in a fire and the other caused an amputation.

While the events were ultimately defended and covered by insurance, the indirect costs from senior managers’ time spent with incident management including depositions and interrogations, as well as damage to goodwill, was equal to or greater than the insurance payout.

The manufacturer, in partnership with an insurance broker, learned that certain safety measures were either overlooked or not documented on these incidents. Even the manner in which the manufacturer managed the incidents created culpability that was avoidable.

As a result, the equipment supplier decided to incorporate a product-safety program centered on a risk-assessment methodology. The program began with senior management creating a steering committee to make a "culture change" from the top down, relative to safety in design, manufacturing, installation and servicing equipment. It also engaged key end-users to assist with its new focus as a means to mend and enhance both the company’s reputation and business relationships.

The process took two years from introduction to deployment, but the manufacturer realized some immediate benefits in insurance rates because it was able to demonstrate a proactive approach to safety in its design and manufacturing operations. This resulted in a significant reduction in premiums, given the fact the company had such severe losses just two years earlier.

With global sales of $200 million, this manufacturer saw warranty claims drop 2 percent over several years, which added $4 million to its bottom line. Lastly, the manufacturer recognized that a good safety program, which can be articulated and shared with end-users, resulted in more sales and sales opportunities.

Avoiding the inevitable – When an employee deems it necessary to bypass or defeat the safety features originally installed on a machine, it must be reported to supervisors along with an explanation for the action. The issue should also be communicated to the equipment manufacturer so a safer, more viable solution can be found.

By including the manufacturer in the problem-solving process, the processor greatly decreases the likelihood of unintended consequences. It is also possible that the processor is not the first to make such modifications. The manufacturer may already have a solution to the problem. There is no need to reinvent the wheel, increase risk or create safety issues.

If an operator has already modified a machine, this change must be communicated to the service technician, engineer or sales personnel from the manufacturer that regularly visits the facility. The representative should document the concern, report it to their company and follow-up with the customer with acknowledgement and/or a remedy for the issue.

Open communication is a key to a strong risk-management and safety partnership. Before installing a machine in a customer’s facility, the supplier should make its risk-management and safety procedures known. The processor needs to understand what to do if a safety issue arises on the machine and know how the supplier will respond to a safety issue, or to issues the manufacturer’s reps identify during a facility inspection.

Protecting the future – As in one of the examples mentioned, if several end-users have deemed it necessary to bypass or defeat the same safety feature on a particular machine, it is a clear sign the manufacturer needs to more closely review that area of the machine. If changes or updates to the machine are necessary, it is the responsibility of the machinery manufacturer to communicate these updates to all its customers using that machine.

The manufacturer has to consider whether it will provide the update to customers free of charge or by purchase. A knowledgeable industry legal or insurance professional will be able to advise manufacturers on these options.

If a modification has already been made by the processor’s machine operator, the service technician, engineer or sales professional learning of the alteration should communicate the details and results (positive or negative) to the customer’s main point of contact, as well as to the machinery manufacturing company supervisor.

Documentation of any modifications to equipment should be filed. This paper trail should include any safety concerns that were noted. If safety concerns are noted, a follow-up letter must be sent to the customer identifying personnel involved, concerns and possible solutions identified. Copies of the report should also be filed with both customer and manufacturer.

Failure to act If a machinery manufacturer fails to act on reported safety concerns, it may show a "callous and wanton willful disregard for the safety and well-being of others." If an incident occurs on a machine where safety concerns have been reported, but nothing was done to remedy the concerns, the manufacturer could be liable for punitive damages.

Providing clear and open communication about risk areas or safety concerns with processors is not only a necessity to maintain a low-loss ratio, it is simply good business to demonstrate the comprehensive measures taken by a supplier to maintain the highest level of safety for the users of its machine.

The implementation of risk-management and safety programs and procedures is simply a good business practice for all companies. For machinery manufacturers and endusers, however, it is a necessity.

A commitment to risk management and safety should not need to become a new budget item. Strategic steps and changes within a processor’s workflow and processes can make a substantial impact. These changes should positively impact insurance budgets, allowing any changes that require funding to fall under the currently existing insurance budget item.

Processors must partner with suppliers that share the same philosophy toward risk management and safety. Employees, suppliers, vendors, customers and contractors that are committed to working toward established safety goals will be open to procedures implemented and will maintain clear communication on issues as they arise. Committing to risk management and safety and surrounding the business with those that share the same interest will ultimately set it apart from competitors as the best business partner.

George Forrester is a principal of AH&T Insurance, Leesburg, Va. (www.ahtins.com), and director of its manufacturing division. He has more than 30 years of experience in property and casualty insurance and risk management consulting, with a specialty in the manufacturing industry. Mike DeRosier is the director of safety for AH&T Insurance’s manufacturing division. He has more than 25 years of industry experience, is a Board-Certified Product Safety Manager and a member of the American Society of Safety Engineers (ASSE).